23-40-112. Prepaid funeral benefits contracts.

23-40-112. Prepaid funeral benefits contracts. (a)(1) The Insurance Commissioner shall approve forms for prepaid funeral benefits contracts. (2)(A) Except as provided in subdivision (a)(2)(B) of this section, a nonguaranteed prepaid contract or a nonspecified prepaid contract shall be approved if the prepaid contract provides the contract holder with interest or earnings during the term of the prepaid contract. (B) If a prepaid contract is canceled under § 23-40-122, the seller may retain the accumulated interest on the deposit or the cash surrender value of the insurance policy used to purchase the prepaid contract in excess of the amount paid by the purchaser. (C) The commissioner by rule may establish additional requirements for a nonguaranteed prepaid contract or a nonspecified prepaid contract. (b)(1) Prepaid funeral benefits contracts shall be in writing. (2) A prepaid contract for specified benefits shall set forth the specific merchandise and services to be provided by the seller and the prepaid contract price. (3)(A) A nonguaranteed prepaid contract for specified benefits shall state that the prepaid contract is not guaranteed. (B) A nonguaranteed prepaid contract may: (i) State the specific merchandise and services to be provided by the seller; and (ii) Name the prepaid contract price. (c)(1) All forms for prepaid funeral benefits contracts shall contain the provisions incidental to the orderly administration of this chapter as set forth in the rules prescribed by the commissioner. (2) A prepaid contract form shall not be used without prior approval of the commissioner. (d)(1)(A) A seller of a prepaid contract for specified benefits shall furnish to the buyer the merchandise and services as stated in the prepaid contract at the prepaid contract price regardless of the cost of the merchandise or services at the date of the contract beneficiary's death. (B) A nonguaranteed prepaid contract shall state that the prepaid contract price is not guaranteed. (2)(A) However, the seller shall not be required to furnish at the prepaid contract price other items incidental to the funeral and disposition of the beneficiary that are clearly identified in the prepaid contract as cash accommodation items. (B) The seller may charge the difference between the cash accommodation fund balance, including accrued interest, and the market price of the cash accommodation items as of the date of the beneficiary's death. (C) If the total funds on deposit exceed the market price of the cash accommodation items, the seller shall return the excess to the buyer or his or her estate. (e) The seller shall not be entitled to enforce a prepaid contract made in violation of this chapter, but the purchaser, or his or her heirs, or his or her legal representative shall be entitled to recover all amounts paid to the seller under any prepaid contract made in violation of this chapter. (f)(1) This chapter does not prohibit the assignment or transfer of insurance contracts as consideration for prepaid funeral benefits furnished in accordance with this chapter or the designation of an organization licensed pursuant to this chapter as beneficiary of a funeral expense or other insurance policy. (2) Such an assignment, transfer, or designation shall not be deemed to be a prepaid contract. (g) The prepaid contract shall contain a provision in substantially the following form: “NOTICE: If this contract is irrevocable and you choose to transfer this contract to a substitute provider, the entire amount of the contract will not be transferred, the seller may collect a fee that includes the cost of transferring the contract, and you may have to pay more to obtain 100% of the services provided for in the contract.” (h)(1) Each seller shall provide advance written notice to the prepaid contract purchaser that the seller intends to procure a single payment whole life insurance policy or annuity on the contract beneficiary to fund the prepaid funeral benefit contract for less money than the total amount of the cash payment if: (A) The prepaid funeral benefits contract was originally intended by the contract purchaser to be fully paid in cash; and (B) The amount of the single premium payment to the insurer by the seller is less than the cash payment provided to the seller by the contract purchaser. (2)(A) Within three (3) business days from the receipt of a notification of death of a contract beneficiary and a request for verification of benefits by an owner, beneficiary, or assignee, or the authorized representative of the owner, beneficiary, or assignee, an insurer shall verify the benefits for a contract beneficiary under a whole life insurance policy or annuity. (B) The verification of benefits under subdivision (h)(2)(A) of this section shall include without limitation: (i) Whether the deceased is a covered person under the policy or annuity; (ii) The death benefit amount under the policy or annuity; and (iii) Whether the policy or annuity is in the contestability period. (C) The commissioner shall promulgate rules regarding verification of benefits under subdivision (h)(2)(A) of this section. (D) The commissioner may impose a fine not to exceed five hundred dollars ($500) for each failure to provide the verification required under this subdivision (h)(2) and not more than five thousand dollars ($5,000) in the aggregate.